In each of the following cases, what is the effect on the short-run aggregate supply (SRAS)...

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Question

In each of the following cases, what is the effect on the short-run aggregate supply (SRAS)...

In each of the following cases, what is the effect on the short-run aggregate supply

(SRAS)

curve?

An increase in firm costs

A.

does not shift the SRAS curve.

B.

shifts the SRAS curve upward.

C.

shifts the SRAS curve downward.

An increase in the money supply

A.

shifts the SRAS curve upward.

B.

shifts the SRAS curve downward.

C.

does not shift the SRAS curve.

An increase in consumption

A.

shifts the SRAS curve downward.

B.

does not shift the SRAS curve.

C.

shifts the SRAS curve upward

business economics

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Answer 1

Answer #1

Option B is correct. cost of production has increased which means that firms are now supplying fewer goods and services. This will decrease production and therefore the aggregate supply. Short run aggregate supply curve will therefore shift to the left / upward

Option C is correct. there is an increase in money supply which will actually reduce the rate of interest that influence investment. aggregate demand will be shifting to the right but there will be no change in aggregate supply

Option B is correct. Change in consumption will change aggregate demand but not influence the short run aggregate supply.

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Answer 2

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